"Impossible" Supplier Management Metrics?

PurchTips edition #231

 

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By Charles Dominick, SPSM, SPSM2, SPSM3

Picture of Charles Dominick, SPSM, SPSM2, SPSM3

Can You Get The Right Metrics Without A System?

A truly strategic supplier management program will be based on supplier performance metrics that relate to the key performance indicators of the overall organization. But it is not uncommon for an organization's information systems and processes to lack the ability to make those metrics readily available.

If that's the case, is it impossible to use those metrics?

Supplier Insurance

Not at all, according to Sherry Gordon, the President of the Value Chain Group, a consulting firm that specializes in supplier management process design and development. She says that you can "use internal stakeholders to generate [supplier metrics]."

"Metrics such as customer satisfaction, on-time delivery, and even quality can be generated or created by having internal people answer questionnaires on a regular basis," according to Gordon. However, relying on internal stakeholders as your source for supplier management metrics has its challenges.

One challenge is getting enough participation. Having stakeholders rate suppliers "takes their time, so it has to be made very easy," advises Gordon. "People have to understand why it's important to participate and give their feedback on supplier performance."

Another challenge is getting information of proper quality. Stakeholders may rate a supplier as a poor performer just because they prefer a different supplier.

To prevent supplier decisions from being made purely on such subjective input, you must get as much quantitative data as possible. For example, you wouldn't want to take action on feedback like "This supplier doesn't deliver in a timely manner." You want to collect more objective data such as "This supplier delivered late three times in 204 opportunities."

Getting human feedback on supplier performance can compensate for a lack of technological and process support. However, to integrate that feedback successfully, it is important to make it easy and meaningful for your stakeholders to participate and to solicit objective, quantitative metrics and not opinions.

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